How to Expand Your Business Into Overseas Markets
Doing international business has become an integral part of numerous successful companies. Think of your iPhone for example. Apple outsources the production of their phones to China. They do this to cut cost. This allows them to be more competitive with increased profit margins. As technology advances, the barriers to enter international trade will diminish more and more.
HOW DO I START?
You need an international business license if you want to do business in a foreign country. Requirements can vary between countries, and the approval process would depend upon your destination country. Here is the basic framework for obtaining an international business license. For starters, you must fill out quite a few application forms. Hiring a law firm located in the foreign country where you want to do business would be a great place to start. They know the area in addition to the local laws, so their expertise is invaluable.
Once you’ve submitted your application, you’ll have a few processing fees thrown at you. You might also have to release additional information about your business’ assets and working capital. On top of that, you may have to prove temporary residency.
The last step is to wait for approval. All applications are reviewed by a special committee which ensures that the applicant meets all requirements. In some cases, there may be an interview.
INTERNATIONAL BUSINESS: OPTIONS AND OPPORTUNITIES
If you want to open an international business, you have several options. Some of them are:
OUTSOURCING AND CONTRACT MANUFACTURING
Labor costs are high in the United States. As a result, many U.S. companies get their products manufactured in countries where the labor is cheaper. This arrangement is often called outsourcing or international contract manufacturing. A U.S. company may sign an agreement with a foreign company to manufacture its products. It will still control the design and development of the product and sell it under its brand name. Contract manufacturing is common in the apparel business. Many American apparel brands are made in Asia and Latin America.
IMPORTING AND EXPORTING
The most common forms of international business are import and export. Many companies that operate in the global market are importers. Other companies export their products to global markets where there is a huge demand for them.
Licensing is a great option for companies that want to get into the international market quickly and with limited financial or legal risks. International licensing agreements allow the licensee to use the intellectual property (copyrights, patents, and trademarks) of the licensor and sell their products/services in exchange for a royalty fee. This is how the arrangement works:
Let’s say you run a UK company that sells flavoured milk. You are confident that your product will be popular in China. However, you lack the resources required to set up shop in China. You cannot manufacture your product in the US and export it to China because it will go stale by the time it gets there. A good solution is to sign a licensing agreement with a Chinese company interested in selling your product. This agreement will allow the Chinese company to make your product in their country using your process and sell it under your brand name. You pull in royalty fees without taking on the manufacturing overhead.
Franchising is another way to expand your business to the international market. The franchiser signs an international franchise agreement with a foreign company (franchisee). This agreement allows the franchisee to use the franchiser’s brand name and sell their products. The franchisee has to run the business according to the business model set by the franchiser. The franchiser will take care of marketing and may also provide training. Restaurant chains like KFC and McDonald’s have franchisees all over the world.
ENTERING THE GLOBAL MARKET SCENE
Entering overseas markets is now easier than it has ever been. The Internet has made it possible for anyone to buy products from all over the world. Today, companies that want to expand their business overseas have many opportunities. Numerous overseas markets are now open for trade and communication is no longer an issue.
THINGS TO CONSIDER BEFORE ENTERING THE INTERNATIONAL MARKET
Ready to enter the overseas market? Here are some important considerations.
IDENTIFY THE OVERSEAS MARKETS WHERE YOU WANT TO OPERATE
You have to identify the precise country/region where you want to establish your business operations. Choose a country where consumers have a healthy amount of buying power.
STUDY THE MARKET
Before you expand your business in a foreign country, you need to study the market. You should be familiar with the local demographics of the country. This will make it easier for you to promote your brand and products in that market.
BUILD AN INTERNATIONAL SALES TEAM
You can build an international sales team through hiring, alliances, and partnerships. Prepare a list of businesses in your industry and contact their executive teams.
EVALUATE YOUR BRAND
When you do business internationally, you can’t always expect your brand name to be your savior. Logos may also have different meanings in different countries. One size does not fit all. It does not matter where you plan to do business – you should find a way to tell your brand’s story.
KEEP IN TOUCH
If you want to operate in the international market, you must keep in touch with your sales representatives, distributors, and other colleagues. Use technologies such as online video conferencing for this purpose.
FIND SALES REPRESENTATIVES
Finding people who can sell your product overseas is extremely important. When you hire sales representatives, choose individuals who are familiar with the market you want to enter.